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At its Open Meeting this morning, the FCC voted to adopt a Report and Order aimed at combatting what it characterizes as “wasteful arbitrage schemes that exploit the system of intercarrier compensation between local and long-distance providers, and indirectly cost consumers an estimated $60 million to $80 million annually.” The order reduces the financial incentives for carriers to engage in these schemes by requiring that the access-stimulating local phone company, rather than the long-distance company, be financially responsible for covering the cost of incoming traffic.

Among other things, the Order expands the definition of “access stimulation” to include situations in which the access-stimulating phone company does not have a revenue sharing agreement with a conference calling, chat line, or similar service, but instead has an unusually high ratio of inbound calling traffic as compared to outbound calling traffic. The revised definition is calibrated to avoid mislabeling rural incumbent local phone companies as access stimulators. The Order also modifies the authorizations of certain intermediate access providers (known as centralized equal access providers) to permit traffic bound for access-stimulating local phone companies to bypass those intermediate providers. This change will allow the access stimulating local phone companies to choose the most cost-efficient route for traffic terminating on their networks and will prevent long-distance companies and their customers from having to provide financial support for these arbitrage schemes.

While past FCC reforms barred access-stimulating phone companies from collecting terminating end office access charges, long-distance companies still had to pay for tandem switching and tandem transport access charges—a loophole the FCC believes has been exploited by access-stimulating local phone companies and their partners as the FCC cut off other avenues for arbitrage.

At its Open Meeting this morning, the FCC voted to approved $950 million in additional funding to improve, expand, and harden communications networks in Puerto Rico and the U.S. Virgin Islands that were devastated after Hurricanes Irma and Maria. The new funding will provide mid- and long-term support to deploy fast, resilient, and reliable networks that will stand the test of time. In Puerto Rico, the FCC voted to allocate more than $500 million over ten years in fixed broadband support and more than $250 million over three years in mobile broadband support. In the U.S. Virgin Islands, the FCC allocated more than $180 million over ten years in support for fixed networks, and $4 million over three years for mobile networks.

Fixed broadband support will be awarded through a competitive process, in which service providers will bid to serve every location in each covered area with up to gigabit speeds. Providers’ applications will be scored based on objective criteria in three categories: price per location served, network performance (speed and latency), and network resiliency and redundancy. Support for mobile services will be awarded to providers that were offering mobile services in the Territories prior to the hurricanes in order to expand and harden 4G LTE networks and deploy next-generation 5G networks. These high-speed, storm-hardened fixed and mobile networks are intended to ensure that every American living in Puerto Rico and the U.S. Virgin Islands is connected to digital opportunity and will have access to communications when they need it most.

FCC Bidding Procedures for 3.5GHZ Auction

At its Open Meeting, the FCC voted to seek comment on proposed application and bidding procedures for the auction of Priority Access Licenses (PALs) in the 3550-3650 MHz portion of the 3.5 GHz Band, which holds the potential to be prime spectrum for 5G services. Bidding in this auction, which is designated as Auction 105, is scheduled to commence on June 25, 2020.

The Public Notice proposes to offer seven PALs in each county-based license area, for a total of 22,631 PALs nationwide. Each PAL will consist of a 10-megahertz unpaired channel assigned by automated frequency coordinators, known as Spectrum Access Systems. Licensees would be permitted to aggregate up to four PALs in any license area. The Notice also seeks comment on the following proposals:

Using an ascending clock auction format (similar to the format used for Auction 102 and to be used for Auction 103), in which bidders indicate their demand for generic license blocks in specific counties;

Offering bidders the option to bid at a Cellular Market Area (CMA) level in the 172 CMAs that are classified as Metropolitan Statistical Areas and comprise multiple counties; and

Incorporating an “activity upper limit” that would allow bidders to submit bids that exceed their current bidding eligibility, to help mitigate the possibility of losing bidding eligibility under certain circumstances.

The Regulatory Mix, Inteserra’s blog of telecom related regulatory activities, is a snapshot of PUC, FCC, legislative, and occasionally court issues that our regulatory monitoring team uncovers each day. Depending on their significance, some items may be the subject of an Inteserra Briefing.